Seize the Days

Have you noticed? There haven't been any recent entries for Sur Real Estate of Mind...

In mid-September it was announced that Community Financial Resource Center and LATMAP (Los Angeles Teachers Mortgage Assistance Program), the organization/program through which I created this blog would have to temporarily suspend its programs due to the current economic and financial hardships that have threatened the existence of many organizations, companies and households. :(

Since I was the lone writer of this blog this page became inactive as well. I have now sought out new career opportunities and will not be with the aforementioned organization when/if they reinstate their programs at the beginning of next year. I have also left the "world of homeownership counseling" all together and will now be working as a commodities broker (basically working with foreign currency, gold, precious metals, futures, options, cotton, stock indices, etc.)for a firm in downtown Los Angeles while simultaneously running a t-shirt design company, Wake Up Tokyo. It may seem like a leap from homeownership counseling to investing, but I've always wanted to pursue a career in investing and thus, the "loss" opened up an opportunity. And the t-shirt company seemed like a given considering my art background.

This blog was my "baby" of sorts - my first attempt at blogging, and I felt we had a good run. I am pleased with how far it went and the impact it made. Thanks for reading!

Signing off...

Costco Realty?

Wait A Sec...Costco Realty?

Some people are Starbucks junkies, others are devout Mac users, many are followers of the House of O aka Oprah and then there are those, like me, who are campaigning that Costco be recognized as it's own religion...ok maybe it's not that serious. But Costco is one of my favorite places to shop. Have you ever been to one? They have everything there. The prices are great for what you get. And let's not forget to mention the food. Not only can you snack while you shop (they have loads of samples), but you can pick up a juicy hot dog and soda with unlimited refill for $1.50 on your way out. So, imagine my surprise when my co-worker Veronica Lopez tells me that Costco has it's own mortgage and realty service. So, I had to do my own investigation...

• Looks like Costco real estate services are actually through LendingTree

• "Costco Member Benefits" that offer a Costco Cash Card at closing, lower rates, approved lenders, and "loan offers in minutes".

• Work with one of their affiliated Realtors and receive a $2,000 cash incentive

I guess they're not much different then other discounted realtors...

EDIT: So I was thinking to myself, "If Costco does real estate, then Wal-Mart surely does!?" Well, they only do commercial properties...

Housing Bill: What It Means for Buyers

Housing Bill: What It Means for Buyers
by Hassan Nicholás

As you may or may not know a Housing bill, the Housing and Economic Recovery Act of 2008, was signed into law about a month ago, on July 30^th. We’ve received some questions about it from some of our “viewers” so we’d figure we would put together a summary of what this new bill means for first-time home buyers. Incentive for this legislation came out of the need for more foreclosure prevention measures.

The tax credit feature of the loan is the only segment of the bill specifically aimed at first-time home buyers.

• Under bill, first-time home buyers (defined as not having owned a home in the last three years) will be eligible for a tax credit of 10% of the purchase price up to a maximum of $7,500.

• Income limitations. Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 would qualify for the full $7,500 tax credit. The tax credit phases out for higher incomes.

• You are only eligible if you bought after April 8^th of this year and before July 1, 2009

• It’s only a one-time tax credit

• The money is repaid after over 15 years, in which you make $500 payments per year starting the two years after you buy the house

• If you take the full $7,500 credit your income tax bill will increase by $500 a year for 15 years.

• If you sell the house before then you pay Uncle Sam the remaining balance

Essentially, the government is giving you an interest free loan to be added to your disposable income.

Property tax deductions were modified for all homeowners.

• Single filers who pay property taxes increase their standard deduction by $500, $1,000 for couples filing jointly.

• You can’t increase the standard deduction by more than the property tax bill. Example: You’re married and filing jointly you get an $800 deduction if you pay $800 in property taxes, not a $1,000 deduction.

As current law has it, you can deduct property taxes from federal income tax only if you itemize deductions on Schedule A. The new twist will benefit those, like retirees, who own their houses outright and therefore don’t pay any mortgage interest or people who just don’t have enough deductions to itemize on Schedule A.

FHA Program Updated

• FHA loan limit increased from 95% to 110% of the median home price in the area

• The cap set at 150% of the GSE limit, currently $625,000

• Home buyers required to put minimum 3.5% down

Seller-Paid down payment assistance,prohibited.

Additional

• The new bill will require licensing and registration of all mortgage brokers.

• Mortgage lenders are now required to present home buyers and owners looking to refinance with disclosures within three (3) days of applying for some loans. Disclosures must also be required no later than seven (7) days before closing, allowing borrower to loan shop for more favorable terms. Lenders will also be required to inform borrowers of the maximum mortgage payment possible under the loan (Wow, think how that alone could have saved many homes.)

So there you have it. Remember that there is more to the Bill, as it applies to distressed homeowners primarily. As far as how it could affect potential home buyers I hope that I outlined the main points. I would also advise you do more research.

News Wire: Charitable Down Payment Assistance Programs...Gone

News Wire: Charitable Down Payment Assistance Programs...Gone

by Hassan Nicholas

OK, so...remember that entry I wrote about the legitimacy of charitable down payment assistance programs? I had my suspicions and it appears I wasn’t the only one. Recently the Department of Housing and Urban Development aka HUD announced a rule intended to exclude “quid-pro-quo” down payment assistance programs. The popular program permitted FHA borrowers to receive cash gifts/contributions, directly or indirectly, from the seller. By charging a service fee popular charitable assistance programs such as Sacramento-based Nehemiah Foundation and others went around a loop hole that prohibits contributions and gifts from the seller. Now that it’s banned it has hurt the business and aspirations of many real estate agents and home buyers. Even with prices still falling in many areas, the quality (availability) and quantity (the amount) of assistance offered for first-timers has decreased substantially. All the more signs that spell out an economic slump that hasn't ran it's course yet.

Edit:

Even with the passing of the Housing Bill, charitable down payment assistance programs are not going down without a fight. Here is a statement released by AmeriDream that I stumbled upon,

"Last night, Congress introduced bipartisan legislation, H.R. 6694 that would reauthorize and reform charitable downpayment assistance. This bill would remedy a harmful provision in the new housing law which limits homeownership opportunities for low and middle-income Americans. The legislation, sponsored by U.S. Reps. Al Green (D-TX), Gary Miller (R-CA), Maxine Waters (D-CA), and Christopher Shays (R-CT) reauthorizes and reforms charitable downpayment assistance funded in part by sellers, which has helped over one million families and individuals become homeowners since 1999. The program was eliminated by legislation signed by President Bush on July 30, 2008.

The Green-Miller-Waters-Shays plan would re-authorize and reform non-profit downpayment assistance and secure it as an allowable source for FHA borrowers. The bill seeks to ensure that providers of the downpayment assistance operate in a transparent manner to guard against conflicts of interest. The bill also includes language to ensure that FHA maintains its financial stability by permanently authorizing the Secretary to assess higher premiums to higher risk borrowers."

OK, so what this means is that supporters of these types of programs are attempting to pass a bill that will counter the provision outlined above. And word is, it will more than likely not be voted until 2009.

Hassan's 7 Picks for First-time Homebuyers

Hassan's 7 Picks for First-time Home-buyers

1. WalkScore - A very interesting site that lets you type in an address and measure the 'walkability' of that area. The score takes into account amenities, parks, business listings, etc. but does not take into account proximity to public transportation, crime, and other factors. All in all, it's still an interesting site and another tool to help in your house hunting. I input our organization's address to see how we faired. Look at the image below.
2. LAPD Crime Maps - As far as crime goes, LAPDCrimeMaps.org picks up where WalkSource doesn't. Input a location and the website will generate a detailed map outlining the various types of crimes committed in that radius over a given amount of time. Of course I was curious to see who our neighbors are (CFRC is located in South LA aka South Central) and saw, at least for this 3-day window, we've had a couple of auto thefts in the area. Nevertheless, I recommend house-hunters (especially New Los Angelenos) to monitor their target neighborhoods at least three months in advance. After all, this is LA...
3. Real Estate Terms Dictionary on Investopedia.com - Memorize this list of real estate terms and definitions and surprise your real estate agent when you've been following the Case-Shiller Index and feel although your qualifying ratios could qualify you for an Interest Only nonconforming loan, you'd rather wait still prices fall and save for a two discount points purchase.
4. APR Calculator from BankRate.com - A handy tool to determine the annual percentage rate on a mortgage complete with amortization schedule. Play around with this guesstimate how much that Victorian house in Angelino Heights could cost you monthly at current interest rates.
5. GreatSchools.net - Want to know how the middle school in your future neighborhood measures up? Get the inside scoop from parents and students themselves from this site. And if you're really savvy, check out the API (Academic Progress Index) Rank of any school here.
6. Google Maps - They have this great feature that allows you type in an address or area and it will show a street view of that location - essentially providing a virtual tour of the neighborhood. Yes, I know ZipRealty and Trulia do this also, but it seems smoother on Google. Plus, you can enlarge the screen size. I like to use this feature to get a feel for what the neighborhood "feels" like. Also, sometimes pictures can be deceiving, so this is a good way to follow up on interested properties. The only caveat I see is, despite looking very current (I of course tested out my own address), I'm not sure how often it is updated.
7. Google Transit - Another great creation by Google...with this tool you can find out how (convenient it is) to take public transportation from, say, your future home to work. Not gonna ditch the car you say? Well, as gas costs will inevitably rise and traffic in LA worsens you might value having public transportation a walk away in the future.
   

Honorable mention goes to i-Neighbors.org an on-line community that lets connects residents of specific neighborhoods. Find your (future) neighborhood here and get to know your future neighbors.

News Wire: CalHFAs Community Home Loan Program

News Wire: CalHFA's Community Home Loan Program
by Hassan Nicholás

The State has just launched a new program to help those first-time home buyers interested in purchasing Real Estate Owned (REO) properties located in selected counties and zip codes in California. Under the Community Home Loan Program participating financial institutions will provide a special sales price on their eligible REOs located in specified areas, at below market interest rates and 100% financing. Remember that other CalHFA 1st loan program can only do up to 95% financing. All of this could add up to a great deal for those in the market for bank owned properties. As of now there is nothing on their website about this new program so we expect that they should be making updates soon.

Check out the eligible areas below.

News Wire: CitiMortgage ACCESS Program

News Wire: Citi's ACCESS program will give first-time home buyers more access
by Hassan Nicholás

Citibank sheds a little hope for anxious first-time home buyers.

If you are an anxious buyer waiting for the City of LA to replenish funds into it's first-time home buyer program you are surely not alone. In fact, these days it seems as though there is a collective frustration with down payment assistance programs in general. Subject to local government budget allocations, strict income guidelines, property location restrictions, and other caveats down payment assistance programs can bottleneck the home buying process. Though for many, it is a "necessary" frustration - the difference between buying and not owning a home.


Fortunately, banks are beginning to realize this. Through CitiMortgage's ACCESS Loan Program a borrower can obtain a 1st mortgage with the option of an 8% second in down payment assistance for over 100% financing. That's more than CalHFA's 3% in down payment assistance. And the differences don't stop there. Below we highlighted the main points.

• 30 to 40 year fixed rates

• Longer interest-only periods than other programs (10 years)

• NO sales price limits

• NO recapture tax if home sold later

• Duplexes, 2-unit properties are eligible

• Income limits much higher (mid $80k for one person household)

• Household income not used, only qualifying

• Funds are consistently available, backed by private funding

• NO first time home buyer requirement

So, could this be a competitor to CalHFA? Possibly. Especially considering that the state's rate is still in the 7s, ACCESS could prove to be a fierce competitor for government-sponsored down payment assistance programs.

Ready to give it a try? Contact our partner mortgage broker Ira Smith @ 310-217-2500 ext. 201

Note: LATMAP through CFRC will be able to broker these loans through our Savvy, Sound and Safe Home Loan Program (SSSHLP) too!

New Homebuyer FYI #5

New Homebuyer FYI #5

• Pocket Listings - Think the MLS is the home buyer's panacea for all house hunting needs? The MLS may not be as comprehensive as you thought simply because many properties for sale never make it on to the MLS. These properties, called "pocket listings" are bought "in-house" or "off-market" to a preferred buyer - usually someone who has a special relationship with a seller or real estate agent. In some large real estate brokerages it is common practice to give their agents and their agents' clients an opportunity to purchase properties before they go live on the market. Sometimes pocket listings will appear on MLS for a short period, just long enough for a potential buyer to find out the home is already in escrow.

• With REOs, Ca$h is not always King - The market for REOs can be competitive, which is why buyers must make more competitive offers. In some instances deals are won on terms rather then offering at or above asking price.

• Co-Signer vs. Co-Borrower - So what's the difference? Not much really. The bank itself does not see a difference between co-borrower or a co-signer. If you're a co-borrower you appear on title. The bank would have a co-signer's information, but only the buyer would appear on title. If a co-borrower wants to be removed from the title (liability of the mortgage) the buyer would have have refinance. A quit-claim deed can be executed for a co-signer to sign off on title.

• Home Inspections - You can ask specifically for a copy of all disclosures the seller has received from past buyers under contract. When buyers communicate some issues raised from a home inspection the sellers usually would want to see a copy of the supporting documentation to attempt to negotiate those issues. The documentation they receive is called a summary report, which is a quick overview of the inspection. Sellers are required to disclose or repair whatever has been uncovered during that inspection and represented in the summary report.

A Glimpse at Charitable Down Payment Assistance Programs

Charitable Down Payment Assistance Programs: Friend or Faux?

Charitable organizations that offer down payment assistance programs have been under heat in general for the potential "loop hole" risks and other issues outlined by HUD, the IRS, and real estate professionals. Typically offering between 1 and 3%, charitable organization offering down payment assistance receive a contribution from participating seller while simultaneously giving the buyer a gift to be used as assistance for purchasing a home. Opposers point out the legal loop hole of getting around an FHA violation. Defenders' 'glass half full' perspective points out the numerous success stories of minority and low-income home buyers finally realizing their American dream. Here we attempt to give some insight to would-be buyers; outlining the pros and the cons. You be the judge.

(pros) Pros

• No income restrictions. From Merchant to Millionaire, anyone would be eligible.

• No property price restrictions beyond FHA guidelines

• Transaction process much quicker then government-sponsored down payment assistance programs because there is no subordinate loan involved.

• Program is not tied to funding since gift monies is received via the seller's "contribution"

• Unlike government purchase assistance programs, charitable down payment assistance programs will not put a lien on the property

• Does not require an "approved" lender. Any agent and lender can use this program for their clients.

• Gift funds can be used for down payment, closing costs, rate buy downs, and pre-paids.

• Can be used with any other down payment assistance programs as long as those programs accept gift funds.

• They are a competitive means of a getting house hold. In slow markets, these type of programs can inject some activity.
  

(contras) Cons

• Risk that seller will roll (amortize) their contribution into the sales price. Essentially, the buyer would be financing and paying for their own assistance. Think of it as the seller just adding their contribution to the sales price during the negotiating. If that's done enough you'll see an inventory of inflated prices.
  

• Some have been found to violate the intent of FHA regulations

• Legally, a seller cannot gift money to the buyer. A seller could get around this violation by feeding their money through a non-profit, who in turn gives it back to the buyer. If the transaction cannot be done without the seller making the "donation" then it clearly violating the true intent of FHA guidelines.

• They have unusually high default rates. I wonder if the same can be said about government-sponsored assistance programs that encourage or require the buyer being educated about the home buying process...
  

• FHA does not approve any down payment grant program. It is up to your lender to work with a reputable organization that follows FHA guidelines.

• Government-sponsored programs require at least 1% from the borrower's own funds for a reason. Charitable organizations that provide down payment assistance don't.
  

Though these are a legal means of assisting buyers, as to whether CFRC and LATMAP will endorse these programs remains to be seen. There are some issues that we have noticed which play with the legitimacy of these programs in the first place. For starters, most of the charitable down payment assistance programs I have come across seem to follow the same formula. PreferredProgram.org, HopeFundsProgram.org, HomeDownPayment.org among others all share the same cookie-cutter format. In fact, PreferredProgram.org and HopeFundsProgram.org are exactly the same. And HomeDownPayment.org is not even a website. Their whole website is really just a 10 page PDF document that shows how the program works and who to contact. That's it? Yes, that's it.

What also raises flags is that none of the programs I've ran across require or at least promote homeownership education. What merits a program true down payment assistance can be debated. However, in our circles of other non-profit organizations we understand homeownership education and down payment assistance programs to go hand in hand. A program would include something full-service; certified home counselors, workshops, formal partnerships with real estate professionals and lending institutions. And an organization will always have more than one service/program to offer. All the aforementioned programs I listed appear to be skeleton "non-profit" organizations that are really in the business to make profit through collecting fees. If I sound hesitant I have reason to be. Many of these charitable organizations that have popped up in recent years have had their charitable status revoked by the IRS.

I am not saying that these programs are evil, however I would question the motives for some. Nehemiah and AmeriDream are arguably the most popular charitable down payment assistance programs and have the best reputation. Nehemiah, for instance, lists several banks, corporations and organizations as its partners. Both organizations have established track records within community and a history of providing service - which is why I personally can only recommended those aforementioned programs for those seeking down payment assistance grants. And the fact remains, programs like these are enabling people, who otherwise would be priced out, to purchase homes. Like with anything that deals with purchasing a home, one has to do their due diligence.

New Homebuyer FYI #4

New Homebuyer FYI #4
by Hassan Nicholás

• Supplemental Tax - Most home buyers are unaware of or don’t understand supplemental property tax, but if you’re not prepared it could be quite a payment shock. The tax is an additional tax beyond the normal annual tax you would pay for any increase in the value of the property as determined by the assessor. For a home buyer, this means any increase of value from the former assessed value, an addition of a room onto the house, a new pool and any other major improvements will be included. The tax, which is billed separately, reflects the tax on the difference in the new value of the property versus the old value. Tax rate can range between 1% to 1.2% depending on area code, meaning on a property whose value increased by $100,000 a buyer could expect to pay a supplemental tax of $1,000 to $1,200. The tax payer (you, the buyer) will receive the supplemental tax bill many months after purchasing the home. The bill is split it in two halves, the first of which arrives with a no-penalty deadline for 30 days and then four months thereafter to pay the second half. Because the tax is supposed to capture the current value of the property you will only receive a supplemental tax once. And any reduction in value will result in a refund of taxes paid or taxes owing.

• Maintenance Costs - If you're only planning for PITI (principal, interest, taxes and insurance) then you're playing with the risk of getting into unexpected debt. Maintenance costs is definitely one of the "hidden" costs of homeownership, so if you're in the market to purchase a single-family home you must plan for it. Some experts recommend saving 1% of the purchase price for annual maintenance. Divide that percentage by twelve and it will tell you how much you should be setting aside monthly. And while we're at it, you had be saving for furnishings as well. After all, you don't want to live in a house with an empty living room.
  

Down Payment Assistance using Real Numbers

Down Payment Assistance using Real Numbers

by Hassan Nicholás


By request we have been asked to do a demonstration of how using a down payment assistance program could work with alleviating higher costs and narrowing the affordability gap between buyers and home prices.

The bottow example uses the County of Los Angeles HOP (Home Ownership Program), ADDI (American Dream Down Payment Initiative), and MCC (Mortgage Credit Certificate) programs to illustrate this concept:

• HOP offers a deferred loan of the lesser of $90k or 25% of the appraised value in targeted areas, and the lesser of $80k or 20% in non-targeted areas.

• ADDI offers the greater of $10k or 6% of the appraised value of the home

• MCC offers between 15-20% tax credit, depending on area.

Remember that this is only one possible scenario out of many. It is just a sneak preview as to what we cover in our workshops to help your understanding of alternative financing methods and strategies.

Down payment assistance can be a great tool for a first-time homebuyer, but for many reasons explained here and here, you should always consider all options.

NeighborHoodwinked: The Fallacy Behind the American Dream

Opinion

NeighborHoodwinked: The Fallacy Behind the American Dream

by Hassan Nicholás

hood·wink [hoo d-wingk]
–verb (used with object)
1. to deceive or trick.

Do you remember where you were when you the heard the POP!? – the defining moment that signaled the end of a hyper-inflated real estate bubble? I remember I was sitting at my desk, much like I am now, mulling over real estate news...probably finishing off some yogurt. Back then I believed in something called the “America Dream”. We talked about it in our workshops, counseling sessions. It even appeared in bold white letters on our workshop workbooks that we would pass out to anxious first-time home buyers. Now, many months later the once inspiring phrase has escaped me.

When most envision the American Dream imagery of houses guarded by pristine white picket fences, perfectly manicured lawns, and friendly neighbors comes to mind. It’s hard to ignore the temptation to want ownership of something, anything in this world. Whether it be a car, a home, or limited edition Jordan’s there’s an intangible value added that we could best describe as pride. Americans find pride in their homes (among other things), because for us it represents that we have succeeded, that we have arrived.

If you are a homeowner you deserve that feeling. Purchasing a home, for most people, will be one of the most significant purchases you will make in your lifetime. Fact. There are several

But now that we have arrived are we still living or striving for the American Dream?

Many pundits claim that house prices must fall an additional 30% to align them back to where they've been historically. This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, thus a drop of 30% would be needed. Right? Nope. Though appealing on the surface, this simplistic analysis is flawed for a variety of reasons. The most important? It neglects the fact that a great majority of Americans buy their houses with mortgages. "And if one buys a house with mortgage, the most important factor in deciding what to pay for the house is how much of one's income is required to be able to make the mortgage payments on the house." Today the rate on a 30-year, fixed-rate mortgage is around 6.5%. Back in 1981, the rate hit 18.5%. Comparing house prices of today to that of the 1970s or even 1980s, when mortgage rates were treading on astronomical levels, is not only wrong but downright misleading.

We have been conditioned since birth to believe owning a home is one of the best, most secure methods of accumulating wealth. Many real estate professionals tout that owning a home is a better investment then the stock market. Though, studies have shown this is hardly the case. Homeownership is something great to experience and have, but it's not a guaranteed money maker. I was among the many that believed "real estate always appreciates". Many victims of our current real estate crisis probably repeated similar mantras, but it didn't do much to curtail the wave of price drops across the nation. The good thing about this (if anything positive can be pulled from this situation), is that I have been forced to think about homeownership in a different way. Now, feeling suddenly enlightened, I have began to explore the more realistic benefits of owning a home. And once you start thinking, you actually come up with many reasons why owning a home can be such a wonderful thing.

Just some of the reasons I came up with:

• Leverage. If you been to one of our workshops you've seen an example of how one can leverage a small amount of money to buy a significant piece of property. If that property appreciates well, you discover your gains are greatly compounded.
• The intangiblel. Cost of buying a home in El Sereno, $310,000. The feeling of buying your first home with a backyard big enough to house all three of your Irish Wolfhounds? Priceless. Emotions will definitely come into play as you decide whether buying is right for you. I feel it's very pertinent to consider the emotional outcomes, but don't let them the reason you make an irrational decision.
  
• Rent vs. Buying. Through some creative financing (and I don't mean ARMs, more like deferred loans) the costs to rent could be equal to or greater then the costs of owning a home of similar square footage.
• Ownership can help start/build generational wealth. On a social level, it helps build a "savings culture" and lift some families out of poverty.
• Etc. There are so many other benefits to homeownership that you will discover as learn more about the process and everything real estate markets entail. Have any to share? Let me know and we can continue this list.
  

When Should You Buy?

Before you figure out when you should buy, determine how you will buy.

Here's my list of factors you should take into account before you make one of the most (if not, the) biggest purchase in your lifetime.

• Real estate data - Those who are able to interpret real estate data well can probably make a good prediction of where the market is headed. (Hint: Prices are still falling) For the rest of us, there's a gamut of real estate forums and news that can provide just as good as information that will give us insight. And pretty much how you perceive the market will determine your approach - are you a cheerleader or a doomer?

• Interest rates - Watch interest rates. Why? Because your mortgage is Principal, Interest, Taxes and Insurance.

• Subsidy Programs - If you're a first time home-buyer and your ability to finance a home depends on the availability and amount of assistance programs this will be a definite factor.

• Motives - Why do you want to buy anyway? For an investment opportunity (a la flipping), because you want security, rental income etc.? If you are looking to add to your wealth through the future potential appreciation of your purchase then look no further to current real estate headlines and you will see that the "but, real estate is always cyclical" philosophy is currently debunked. Not saying that you can't make money off equity, but to ignore potential rental income would be a mistake.

• What's your time line? - How long do you intend to stay in this house? A short-term schedule and long-term schedule will impact how you approach home-buying.

• Lifestyle - A household with family or expecting family will certainly have different needs then say...a bachelor pad. Even if you home will eventually be shared by your partner, you might want to consider what type of lifestyle you will have to forgo and any other adjustments.

• ? - And of course there are an innumerable amount of reasons outside of this short list why you should or shouldn't buy. Hopefully, you will have considered most of them.

Have any more reasons that are missing from this list? Let me know, and we'll keep adding on...

Subsidy Programs Update

Programs & Status

LAHD Low Income, Mod 120, Mod 150 - January 2009*

LACDC HOP - November 2008*

LACDC ADDI - July 2008*

LAHD ADDI - Available

LAHD MCC - Available

CalHFA (ExtraCredit Teacher, CHDAP, CHAP, HiCAP, etc.) programs - Available

*Reflect anticipated dates that are not guaranteed.

I already know what some of you are thinking. There's no way on earth I'm going to wait till November or January of next year to see if these programs will be available. For others, this is just part of a delayed waiting game that reflects the current real estate market and state of economy.

If you were counting on down payment assistance the question you should ask yourself is, will the lack of sufficient down payment assistance programs prevent my purchase or delay my purchase? If prices for your area are predicted to continue to fall, then it wouldn't exactly be advisable to buy now anyway, because you would missing out on potential savings.Your decision on whether to purchase now or later will depend on well you understand this market - specifically, your local market. If you're confused about the When you should buy, look at my list of the How should by first...

Photo Tour: Park La Brea - Miracle Mile

So, my video editing skills have improved since last time I did this.

Califotography: A Pass Through Miracle Mile, Glimpse of Park La Brea

This brief photo tour shows parts of Park La Brea and Miracle Mile. This popular, growing area is sandwiched between Beverly Hills and Hancock Park, bordered loosely by Wilshire Boulevard, 3rd Street, Fairfax Ave and La Brea. It is home to the La Brea Tar Pits, LACMA, Pan Pacific Park, The Grove, and the Peterson Automotive Museum. It has a great mix of new and old mid-rise apartment complexes, beautiful one story homes, and entertainment thats spans from free jazz concerts in the park to margaritas on Monday at El Torro. Enjoy.




Here are some preview pics:

New Homebuyer FYI #3

Compiled by Hassan Nicholás
FYI #3...random stuff to know

• Real Estated Owned property or REO means the bank owns the property and is selling it. Bank must deliver the property to a new owner without past liens, either property taxes or HOA dues. Recorded liens - that's the guarantee. Liens that have not been recorded are not necessarily cleared by the seller or guaranteed by the Title Company. Most likely, if the HOA has put a lien on the property, the bank will pay off the lien. The bank can't close escrow unless all liens are paid off.

• The short sale process is lengthy and rarely successful for first-time home buyers. Only 5-10% of short sale listings actually close, according to professionals in the field. Most are taken off the market by the owner itself or because of foreclosure. If you decide to make an offer it is advised that you put a clause in your contract that your deposit cannot be cashed until it is clear that the sale has been approved by the mortgage company and the contract has been signed.
  

• A trustee sale is when a bank tries to offload a pre-foreclosed property. Typically, the opening bid on a trustee sale is set at the amount of the first trust deed loan balance. Sometimes short sales are taken off the market through trustee sales.

For more questions check out

The New Architects and the Re-Construction of the Real Estate Market

The New Architects and the Re-Construction of the Real Estate Market

by Hassan Nicholás

At this moment, as you are reading, another headline signaling the collapse of the US real estate market is going to press. And so goes our desensitization to the current reality. In this day and age where mortgage delinquencies, subprime lending, and housing inventory are at historical highs it can be easy to have a casual attitude about our real estate market. Perhaps we have been so inundated with "doom and gloom" headlines that we have found acceptance in our fate and have resigned to the fact that if we're going to ride this wave, we got to get our feet wet.

In many ways this crisis will change the way people think about real estate in general. The so-called "American Dream" as picturesque as it sounds, has been nothing short of a nightmare for many homeowners...and even potential home buyers. Now that the "lions" and "vultures" have feasted all that we have is a shell of that "dream". When we decide collectively that we want to rebuild these abandoned neighborhoods, revive the market, and open up feasible opportunities who will be part of the re-construction?

Nonprofit Organizations

If there is a lesson to be learned it is that the home buyer must do their due diligence and not walk blindly into one of the biggest purchases they will ever make in their lifetime. Housing agencies and community development organizations target these individuals in hopes that through proper preparedness and education one can avoid making costly, emotionally devastating, sometimes unmanageable decisions.

Imagine how many families would have been saved if uneducated borrowers were fully explained adjustable-rate mortgages? Or even the correlation between their FICO score and their interest rate? Yes, some of the foreclosures are tied to the reckless spending of greedy "investors", first-timers trying to get rich off of real estate, and speculation. However, within that cloud we also find families who were simply victims; targeted by shady real estate professionals. To purchase requires a significant amount of money and likewise the buyer should invest a significant amount of time learning as much as they can about their purchase. First-time home buyer workshops offered through the aforementioned groups illustrate the home buying process to the would-be buyer as well as provides resources that can otherwise be difficult to access.

However, a homeownership education workshop is not a panacea for the inevitable. Even those who were well-informed purposely chose to dive head first into something they knew they couldn't afford - allowing greed to blind them. It is not the speculators that need education, rather the person seeking the "American Dream" - they are ones that need to be enlightened. Another group that would benefit, are of course, the current homeowners who risk foreclosure.


Policy Makers

To curb foreclosures from metastasizing any further Congress has been scrambling to put together new legislation that would alleviate the financial squeeze for distressed homeowners. A bill approved by the Senate in April of this year would give tax breaks to owners of foreclosed homes - a measure that would make the prices of "starter homes" (those that a first-time home buyer would typically start out with) artificially high - benefiting only the banks that own the foreclosed property.

Additional pressure has fallen on the weight of some of the very agents that helped perpetuate the trend of reckless lending, the big banks. Lenders such as Countrywide and GMAC have had to beef up their foreclosure prevention efforts and extend more opportunities for existing borrowers facing foreclosure. The government sponsored HOPE NOW initiative attempts to identify at risk homeowners for loan modification and restructuring, but the success that this program will achieve is yet to be seen. A California state plan called for a similar approach - but one that was limited only to borrowers who were current on their payments. It is the "limited spread" of assistance that concerns many real estate professionals and homeowners. FreedomWorks, a grassroots organization that promotes individual liberty held an educational event in March of this year for policymakers - outlining inequities found in the government's 'bail out' approach. There has been other vocal attempts coming from the real estate field to suggest a different approach for helping distressed borrowers, but until any major movements are made, options for borrowers will remain the same.

Much of the success of these programs is dependent on the leg work of the assigned nonprofit housing agencies to identify and serve eligible households. Counselors from these agencies are trained and certified to represent the borrower in all activities and correspondence with the lender and/or mortgage servicer. With their help, a borrower may be exposed to loan modification, forbearance, or any other workout plan. Other proposals have been aimed at re-working how down payment assistance programs work for first-time home buyers.

Affordable Housing Advocates

Advocacy groups supporting affordable housing initiatives can be instrumental in connecting public concerns (nonprofit organizations) with private and government backing. ACORN (Association of Community Organization for Reform Now) is one of the most vocal groups - taking their 'Stop Foreclosures' campaign nationwide. NeighborWorks, "a national network of more than 230 community-based organizations in 50 states" launched 1 888-995-HOPE, a government supported foreclosure prevention to address the needs of the many struggling homeowners.

As the US real estate crisis drags along one can imagine that years from now, when we have fully recovered, will we have learned our lesson? Most certainly most people, owner or renter, has become enlightened by this experience. Adjustable Rate Mortgage, 80/20, and short sale have entered our everyday vernacular. The real estate agent and mortgage lender professions have had their image tarnished. Consumers are more weary, lenders are more strict, and counselors are overwhelmed.

I can say that this whole debacle has certainly changed the way I view real estate and undoubtedly affected my approach to teaching homeownership to first-time home buyers. However, even amongst the "doom and gloom" there is light at the end of this tunnel.

When will this Crisis End...Seriously? Part II

When will this Crisis End...Seriously? Partii: Lost In Speculation
by Hassan Nicholás

The Doomers Perspective


Great time to buy? You're probably better off waiting. There is strong evidence that we are witnessing the beginning of what will be one of the most destructive periods in our otherwise polished economic history. In it's glory days the real estate market allowed owners, first-time homebuyers and investors alike, to purchase homes with little or no money down, stated income, and "loose" allowances. Enter the moral hazard risk that, at the moment the future values for real estate fall, owners can walk, not limp, away from their investment. Cursory lending standards provided the perfect incentive for shady deals to come to fruition. There was money to be made...on both ends.

Not only did the housing bubble give spectators and buyers the ilusion that they would turn an immediate profit, it also convinced developers to build things that shouldn't have been built, encouraged consumers to spend what they didn't have, and allow banks to loan money to those people through bundled loans sold in the secondary market. So for a while lenders, real estate professionals and buyers happily indulged in "Mickey Mouse" transactions in a fantasy world supported by inflated (perhaps, with helium) prices that now seem laughable.


Everyone played their part in artificially appreciating the real estate market beyond what it could handle. But now we know the truth; we paid too much for our houses, banks lent out too much money for what homes were really worth, we were simply too wreckless with our credit. And on top of that, we had greedy lenders, agents, and appraisors orchastrating those transactions. The point is home prices are still years ahead of incomes, even with prices falling all around us, and you still want to buy? Foreclosure rates have risen in Southern California and with more resets on the horizon, we can only assume a percentage of those resets will lead to foreclosure. Inventory is up. As buyers, we have much more selection. And this is fact. But even if you can afford it, will you be lining up anytime soon to buy a (still) overpriced cookie-cutter McMansion in a decaying neighborhood laden with vacant homes? Not to mention the late developers that will add a batch of newly constructed, quickly deppreciating homes to the inventory. Just recently I received an email from the developers of the nouveau hip Santee Lofts downtown offering $100k free money incentives to be used towards purchase price, HOA fees, or upgrades. A month before that they were giving away $60,000. Panic, perhaps?

Sure, the market for real estate is in a falling - and so is the market for first-time homebuyers. Banks and other financial institutions tied to the Market have clearly experienced substantial losses as well. The outcome is that lending standards and practices have tightened. 100% financing is hard to come by, stated income is a thing of the past, and your credit risk is scrutinized a lot more carefully. Monies reserved for low and moderate income first-time homebuyers by the Government are now being used to bail out existing homeowners. And since banks themselves must pull back on how much money they can lend, first timers will have to compete with other buyers in the same pool of financing. Let's not even mention that home prices are still historically high for many.

What makes now, NOT a buyer's market is because everyone is feeling the squeeze. Unemployment, rising costs of everyday necesities (hello inflation), and limited credit will impact the incomes of many. Until sellers realize it does not matter what they think their home is worth, but what buyers feel it is worth paying for, we continue to see this drop. If you're reading this you might be amongst the many waiting for the market to bottom out so you can snatch up your dream home at cheap. Collectively, you're pushing prices down farther too. It's a waiting game that great rewards, but serious risks involved.

The only route out of our current real-estate-bubble-inspired economic malaise is realizing a new "real estate reality". Current home owners and amateur investors must recognize that some of the prices we saw over the past couple of years were an anomaly, just like enourmous gains Internet stocks realized in the '90s. Prices are falling in SoCal, but they still got a ways to go before they stabilize. Buying today could be a $100k mistake.

If there's one thing we should learn from all of this is we can no longer be casual homebuyers. We need to be savvy and smart.

"Become wealthy, knowledge is King." - Nasir Jones

First Came the Lions, Now Heed the Vultures

First Came the Lions, Now Heed the Vultures

The Lambs, Lions, and Vultures of Today's Real Estate Scams
by Hassan Nicholás

And so goes the scene...

We open to a flat, barren landscape. An unforgiving sun hangs high in a cloudless sky. The naked earth resembles an abandoned wasteland, except for the pockets of dusty shrubs and aged trees hunched over. From the left a herd of gazelles move mechanically through the terrain. They stride cautiously, often pausing to scan the incessant horizon. What do they know? Behind the dry shrub, peering from the thick trunk of the trees a lioness awaits. The sun paints her coat a golden orange as she quietly preys. Her clan positioned behind her, steadfast and also patient. And then, suddenly everything stops. The gazelles in their herd, bodies frozen in time, eyes staring blankly sense their fate approaching. Within seconds they are in full flight; scattered yet moving in unison, kicking up dust in their organized confusion. The lioness and her clan follow closely behind, several times hurling themselves at their fragile bodies. They escape with their lives, but leave one. And so it seems the lions have not yet lost their pride. The gazelle, a trespasser to his own land, committed the error of putting too much faith in his own kin. With all the tenacity he can muster, he fends off the feeding of the lions, but not before his blood is drawn. Many moments later we find him, far from his herd, still haunted and dazed by the ambush. With the sun quickly easing into the horizon, he collapses to the ground overcome by fatigue. Then we hear the sound. Against the backdrop of an orange tinged sky a wake of vultures hover, circling their next victim, until they descend upon him gently like leaves falling through the wind.

They are the Lions
The mortgage crisis has exposed the underbelly of an American dream. Real estate agents, lenders, and brokers - defenders, protectors of the homeowners' financial and emotional equity have handed in their integrity in favor of greed. By now we have all become familiar with their modus operandi.

In "Fraud for profit" schemes mortgage insiders such as appraisers, real estate agents, loan officers, and lawyers, like in the wild, often work in teams to take down their prey. After falsely inflating a home's value they obtain a large mortgage using false identities or a "straw buyer". Once the house is "sold" to the buyer, they split the profits and disappear. According to a recent report by TowerGroup, a financial consultancy in Needham Massachusetts lenders will incur nearly $2.5 billion in losses as a result of mortgage fraud this year.

Another type of mortgage fraud prevalent in the post-real estate market crash was the popular "Cash back at closing" scheme. Predatory buyers, such as a greedy real estate investor, locates a home on sale for...let's say $250,000. Then, after obtaining an intentionally inflated appraisal, the buyer receives $320,000 from the lender. The investor recruits a "straw buyer" (using someone else's identity to purchase property) whose name will appear on the deed and mortgage. The seller is paid $250,000 while the buyer (investor) pockets the $70,000 difference. And with profits secure, the buyer lets the home go into foreclosure. Though there is nothing illegal about cash-back-at-closing deals in which all details of the transaction are disclosed to the lender, the opposite is true; if the mortgage company is tricked into lending (far) more than what the value of the property is, it is fraud.

These are the Vultures
The lions came and they feasted. Look around and it's hard to over look the remainders of their gluttony. The increasing inventory of houses are swelling up local markets, driving down prices further from the artificially high ones set by the predatory investors, the lions. They have turned neighborhoods to graveyards, houses a mere skeleton of an American dream turned nightmare. So, no, the chase has not ended. Though the lions retreated to their dens, some to lick their wounds, they left what remained to the vultures. And it is them that lurk in the shadows looking to take advantage of the injured homeowner. Enter foreclosure scams.

Sales agents search for troubled homeowners, who appear on lists used by banks and credit agencies to show owners approaching foreclosure - usually attracting them through mailings and poor marketing (have you seen those bland flyers that look like they took 5 min. to put together?). The sales agent offers an arrangement that sounds too good to be true; the owners put an "investor" on the home's title. In exchange, the homeowner will agree to pay a rent much smaller than the original mortgage payment that they can't afford. The "investor" takes out a new loan, and through misleading paperwork, gives the investor the right to replace the homeowner's name on title. Shortly thereafter, the "investor" stops making payments on the loan, pockets the proceeds from the equity of the home, and allows the homeowners to get evicted or foreclosed upon.

Distressed homeowners targeted by what appears to be a faith-based organization, nonprofit, or any other entity that appears trustworthy targets soon-to-be foreclosed homeowners. Just as in the aforementioned scam, homeowners sign over their ownership rights to a "surrogate owner" who in turn continues to receive payments from the homeowner. Many times the homeowner enters an agreement from six months up to two years of making monthly payments, with the promise that their home would be "returned" in their name once their credit score recovers. Instead, the home goes into foreclosure anyways, the theif disappearing with months or even years of collected payments.

Here Are the Lambs
Starting in 2009 buying a home will get costlier. In a recent agreement with New York State Attorney General Andrew Cuomo, Fannie Mae and Freddie Mac will only buy mortgages from lenders that use independent appraisers. Since these two companies account for more than 70% of all mortgage loans, pretty much all lenders will comply. As it stands, mortgage brokers are required to have only one appraisal for each deal. The broken can then include it with applications to as many lenders as they please. However, with this change a different appraisal will have to be ordered by each lender that the home buyer applies to. Because that is an extra cost to the lender, it will be passed down to the buyer. If the buyer is shopping around this would lead to multiple appraisals being ordered - potentially costing a buyer between $1,000 to $2,000. Now this puts the mortgage brokers business in jeopardy, because the buyer could save costs by dealing directly with a lender. Still, if you look at the numbers the costs of additional appraisals does not come close to how much money is lost when a home is over valued.

Another threat that I see on the horizon is down payment assistance scams. Unfortunately, there's another predator first-time home buyers should be aware of - and this one may not be feline nor carrion. I've seen several websites pop up advertising access to down payment assistance programs to potential buyers. And I've heard from clients who've attended free conventions at luxury hotels promising thousands upon thousands of down payment assistance program money and grants (free money in this this market? I think not!), all of which either don't exist or are obsolete, to the tune of $1,000. But, if you can't afford that, they will sell you a CD on how to locate these programs for just $25. And so the chase continues. Who will come when the vultures leave?

Perhaps the hyena...